A2 Milk shares soar on guidance upgrade
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More news: A2 Milk shares surged in early trading on the ASX after the dairy producer upgraded its full-year revenue guidance and announced the implementation of a dividend policy.
Shares were up 15.2% to $5.54 by 10:35am AEDT, having added 30% since January.
E&P Capital analyst Phillip Kimber said it was a "positive update" from A2 Milk, with trading overall "slightly better" than expected and the establishment of a dividend policy.
Kimber noted that while the overall infant milk formula market in China "remains tough", A2 Milk is performing strongly and winning market share.
The analyst also said he expects small upgrades to consensus forecasts following the update, in the range of 1% to 2%.
A2 Milk upgrades revenue guidance, unveils dividend policy
The news: New Zealand dairy producer A2 Milk lifted its full-year revenue guidance and announced the implementation of a dividend policy.
The context: A2 Milk said that year-to-date trading is ahead of its previous guidance, with the company now expecting "mid to high single-digit" revenue growth in FY25 compared to FY24. The group previously guided "mid single-digit growth".
EBITDA margin as a percentage of revenue is still expected to be "broadly in line" with FY24, with a stronger first half and softer second half compared to the previous year.
A2 Milk said the guidance upgrade was due to a "significant increase" in external ingredient sales at its 75% owned dairy nutrition business Mataura Valley Milk compared to FY24. This has been driven by a higher global dairy trade prices, currency impacts and changes in product mix.
English label infant milk formula sales and liquid milk sales are also "slightly ahead of plan", the company said.
A2 Milk also announced a dividend policy, targeting a payout ratio range of between 60% and 80% of normalised net profit after tax. The first interim dividend is expected to be declared in February 2025 based on the company's first-half result and in line with the bottom end of the range.
What they said: "The A2 Milk Company has made considerable progress in developing its operating model and creating a more resilient business," said A2 Milk chair Pip Greenwood.
"Given this progress and our strong balance sheet position, the board believes the time is right to introduce a dividend policy that delivers sustainable cash returns to shareholders over time," she said.
The sources: ASX announcement, ASX announcement, E&P Capital research
